Thursday, October 22, 2009

Unlike Cheers, where everyone knows your name, figuring out the health care game is becoming more tricky. No one really knows how the game is played, and the ones that do aren't getting their point across.

In the midst of Obamacare, Kennedycare (remember him?), Baucus bills, and so forth, everyone claims to have the answer. Truth is, they don't.

The politicians promise to make health care and health insurance more affordable. Problem is, the way they are going about it won't accomplish either. So now both sides, politicians and health insurance companies, are pointing fingers saying the other side lied.

If either side really knows the truth, they aren't telling it.

But the folks at Reason.com have as good a handle on the issue as anyone. Here are some excerpts.

“Every time we get close to passing reform, the insurance companies produce these phony studies as a prescription and say, ‘Take one of these, and call us in a decade,’" declared the president. “Well, not this time.”

Who say's it's phony?

The prez.

If the studies had in fact supported what he and Congress are saying, that covering sick people without regard to the cost of treating their condition can be done for the same or less money than is charged now, he wouldn't be wagging his finger at the health insurance companies. This is like Billy Clinton wagging his finger and saying "I did not have sexual relations with that woman, Ms. Lewinsky."

Sure, prez, we believed you too.

Forget the studies. Let's look at this logically.

Currently in all but a handful of states, health insurance companies are allowed to review your medical history and decide if they can afford to insure you or not. This is like the mortgage business in a way.

You fill out paper work, provide supporting documentation that indicates you are a good risk and can indeed pay back the loan, and you get your money.

This is the way business was done before Congress, ACORN and Fannie Mae pushed the banks into making loans to people that did not qualify. We learned our lesson . . . supposedly . . . so now we are back where we started. The idea of giving loans to just anyone didn't work so now you have to PROVE you can qualify.

Except now the same folks in Washington who thought it was a good idea for banks to loan $400,000 to a panhandler living on the street now want the insurance companies to give health insurance to people who are also not a good risk. Not only does Washington want the carriers to do this, but they are telling the public their premiums will go down, not up to accomplish this feat.

The president is right that we should always be skeptical of studies that find in favor of the groups that sponsor them. And these two insurance industry-sponsored studies do have their flaws. But the finding that guaranteed issue and community rating mandates increase insurance premium prices has been corroborated by other academic researchers. For example, researchers from MIT, the Brookings Institution, and Brigham Young University reported in a 2008 study published in Forum for Health Economics & Policy that community rating regulations increased premiums for high-deductible policies for individuals by as much as 17 percent and families by as much 33 percent in the nongroup market. In addition, the researchers found that the “guarantee issue regulations that accompany community rating regulations in New Jersey are associated with premium increases of well over 100 percent for individual and family policies.” And as my colleague Peter Suderman recently pointed out, Massachusetts, the one state that combines an individual mandate, community rating, and guaranteed issue, now has the highest premiums for family insurance plans in the country.

Be skeptical, but don't ignore other studies that were not funded by the industry and done BEFORE health care reform was a gleam in PresBO's eye.

Ask the folks in Massachusetts how much their premiums declined once health care reform was enacted.

Wag that finger, Barry.

When is a premium increase not a premium increase?

I guess it depends on what your definition of is, is . . .

According to the New England Journal of Medicine, the director of the Office of Management and Budget, Peter Orszag, cites evidence that $830 billion is being spent this year on unnecessary care. That represents about 30 percent of all health care spending. Of course, insurers have a big interest in trying to reduce unnecessary spending, so they hire flocks of administrators to negotiate lower rates and to monitor medical spending charged by doctors and hospital administrators. Government health care programs like Medicare don’t have to negotiate; government agencies just fix prices, which means they fail to combat waste and fraud effectively.

That's an interesting way of stating it. Medicare doesn't have to correct waste and fraud, they just dictate what they will pay.

By the way, that 30% figure (which I believe to be exaggerated) is for what is termed "unnecessary care". Since most people are covered by health insurance, and most people are in a managed care (PPO, HMO, etc.) plan there really isn't that much that could be considered unnecessary. Health insurance companies are pretty good watchdogs and are quick to refuse payment for care that is not medically necessary.

If you want to understand why health insurance is expensive you have to examine where 85% of the dollars go. That is, look at claims.

A lot of talk is thrown about regarding monopolies, but no one is really talking about monopolies on the health care side.

As hospital mergers produced local monopolies, they were able to increase their prices substantially. “I find that hospitals increase price by roughly 40 percent following the merger of nearby rivals,” Leemore Dafny, an economist at the Kellogg School of Management at Northwestern University concluded in a 2008 study. Insurers with relatively few patients could not bargain effectively with the new local health monopolies, and so dropped out of those markets.

Health insurance companies will do their best to hold down the price paid for services, but in the end, the carriers need the docs and hospitals. Unless carriers can deliver medical providers in their network the carriers have nothing to offer.

“The insurance industry is congenitally weak in bargaining with supply side of the American health sector,” explained Princeton University health economist Uwe Reinhardt on a recent NPR Money Planet segment. Reinhardt believes that insurers largely dance to the fiscal tune whistled by hospitals and physicians.

Medicare on the other hand (as pointed out earlier) doesn't negotiate, they just state what they will pay on a take it or leave it basis.

I will also disagree with the premise that open competition across state lines will lower the cost of health insurance.

Consumers cannot purchase insurance policies that are not licensed by their state insurance commissions and which do not incorporate all the mandates imposed by those commissions. Congress and the states should open up competition between insurance companies by enabling “regulatory federalism” that would allow individuals and employers to purchase health insurance from other states. As a report from the free-market Cato Institute notes, regulatory federalism would force state insurance commissions to compete among themselves. The result would be that “states that impose unwanted regulatory costs on insurance purchasers would see their residents’ business—and their premium tax revenue—go elsewhere.”

If someone in Georgia wants to purchase a policy from Ohio (a lower premium state), under the current way of doing things that would not be permitted. Premiums are lower in Ohio for a number of reasons but one of those is the cost of health care. Health insurance companies pay less to doctors and hospitals for care in Ohio than in Georgia. If someone from Georgia were to buy an Ohio plan, at Ohio rates, the policy would be significantly under-priced.

For the carrier to offer the OH product in GA they would have to raise rates to reflect the higher cost of care in Georgia. This will wipe out most of the premium differential.

We don't need more carriers in Georgia to bring costs down. What we need is the ability to offer good major medical plans that don't have to comply with state mandates.

Speaking of mandates, the various bills put forth in committee in Congress ADD coverage, they don't take it away. It's kind of like saying you will get all you can eat at a buffet but only pay dollar menu prices.

Life doesn't work that way. Except in Washington where you can wag your finger and claim others are lying about what you really did.

Unlike Cheers, where everyone knows your name, figuring out the health care game is becoming more tricky. No one really knows how the game is played, and the ones that do aren't getting their point across.

In the midst of Obamacare, Kennedycare (remember him?), Baucus bills, and so forth, everyone claims to have the answer. Truth is, they don't.

The politicians promise to make health care and health insurance more affordable. Problem is, the way they are going about it won't accomplish either. So now both sides, politicians and health insurance companies, are pointing fingers saying the other side lied.

If either side really knows the truth, they aren't telling it.

But the folks at Reason.com have as good a handle on the issue as anyone. Here are some excerpts.

“Every time we get close to passing reform, the insurance companies produce these phony studies as a prescription and say, ‘Take one of these, and call us in a decade,’" declared the president. “Well, not this time.”

Who say's it's phony?

The prez.

If the studies had in fact supported what he and Congress are saying, that covering sick people without regard to the cost of treating their condition can be done for the same or less money than is charged now, he wouldn't be wagging his finger at the health insurance companies. This is like Billy Clinton wagging his finger and saying "I did not have sexual relations with that woman, Ms. Lewinsky."

Sure, prez, we believed you too.

Forget the studies. Let's look at this logically.

Currently in all but a handful of states, health insurance companies are allowed to review your medical history and decide if they can afford to insure you or not. This is like the mortgage business in a way.

You fill out paper work, provide supporting documentation that indicates you are a good risk and can indeed pay back the loan, and you get your money.

This is the way business was done before Congress, ACORN and Fannie Mae pushed the banks into making loans to people that did not qualify. We learned our lesson . . . supposedly . . . so now we are back where we started. The idea of giving loans to just anyone didn't work so now you have to PROVE you can qualify.

Except now the same folks in Washington who thought it was a good idea for banks to loan $400,000 to a panhandler living on the street now want the insurance companies to give health insurance to people who are also not a good risk. Not only does Washington want the carriers to do this, but they are telling the public their premiums will go down, not up to accomplish this feat.

The president is right that we should always be skeptical of studies that find in favor of the groups that sponsor them. And these two insurance industry-sponsored studies do have their flaws. But the finding that guaranteed issue and community rating mandates increase insurance premium prices has been corroborated by other academic researchers. For example, researchers from MIT, the Brookings Institution, and Brigham Young University reported in a 2008 study published in Forum for Health Economics & Policy that community rating regulations increased premiums for high-deductible policies for individuals by as much as 17 percent and families by as much 33 percent in the nongroup market. In addition, the researchers found that the “guarantee issue regulations that accompany community rating regulations in New Jersey are associated with premium increases of well over 100 percent for individual and family policies.” And as my colleague Peter Suderman recently pointed out, Massachusetts, the one state that combines an individual mandate, community rating, and guaranteed issue, now has the highest premiums for family insurance plans in the country.

Be skeptical, but don't ignore other studies that were not funded by the industry and done BEFORE health care reform was a gleam in PresBO's eye.

Ask the folks in Massachusetts how much their premiums declined once health care reform was enacted.

Wag that finger, Barry.

When is a premium increase not a premium increase?

I guess it depends on what your definition of is, is . . .

According to the New England Journal of Medicine, the director of the Office of Management and Budget, Peter Orszag, cites evidence that $830 billion is being spent this year on unnecessary care. That represents about 30 percent of all health care spending. Of course, insurers have a big interest in trying to reduce unnecessary spending, so they hire flocks of administrators to negotiate lower rates and to monitor medical spending charged by doctors and hospital administrators. Government health care programs like Medicare don’t have to negotiate; government agencies just fix prices, which means they fail to combat waste and fraud effectively.

That's an interesting way of stating it. Medicare doesn't have to correct waste and fraud, they just dictate what they will pay.

By the way, that 30% figure (which I believe to be exaggerated) is for what is termed "unnecessary care". Since most people are covered by health insurance, and most people are in a managed care (PPO, HMO, etc.) plan there really isn't that much that could be considered unnecessary. Health insurance companies are pretty good watchdogs and are quick to refuse payment for care that is not medically necessary.

If you want to understand why health insurance is expensive you have to examine where 85% of the dollars go. That is, look at claims.

A lot of talk is thrown about regarding monopolies, but no one is really talking about monopolies on the health care side.

As hospital mergers produced local monopolies, they were able to increase their prices substantially. “I find that hospitals increase price by roughly 40 percent following the merger of nearby rivals,” Leemore Dafny, an economist at the Kellogg School of Management at Northwestern University concluded in a 2008 study. Insurers with relatively few patients could not bargain effectively with the new local health monopolies, and so dropped out of those markets.

Health insurance companies will do their best to hold down the price paid for services, but in the end, the carriers need the docs and hospitals. Unless carriers can deliver medical providers in their network the carriers have nothing to offer.

“The insurance industry is congenitally weak in bargaining with supply side of the American health sector,” explained Princeton University health economist Uwe Reinhardt on a recent NPR Money Planet segment. Reinhardt believes that insurers largely dance to the fiscal tune whistled by hospitals and physicians.

Medicare on the other hand (as pointed out earlier) doesn't negotiate, they just state what they will pay on a take it or leave it basis.

I will also disagree with the premise that open competition across state lines will lower the cost of health insurance.

Consumers cannot purchase insurance policies that are not licensed by their state insurance commissions and which do not incorporate all the mandates imposed by those commissions. Congress and the states should open up competition between insurance companies by enabling “regulatory federalism” that would allow individuals and employers to purchase health insurance from other states. As a report from the free-market Cato Institute notes, regulatory federalism would force state insurance commissions to compete among themselves. The result would be that “states that impose unwanted regulatory costs on insurance purchasers would see their residents’ business—and their premium tax revenue—go elsewhere.”

If someone in Georgia wants to purchase a policy from Ohio (a lower premium state), under the current way of doing things that would not be permitted. Premiums are lower in Ohio for a number of reasons but one of those is the cost of health care. Health insurance companies pay less to doctors and hospitals for care in Ohio than in Georgia. If someone from Georgia were to buy an Ohio plan, at Ohio rates, the policy would be significantly under-priced.

For the carrier to offer the OH product in GA they would have to raise rates to reflect the higher cost of care in Georgia. This will wipe out most of the premium differential.

We don't need more carriers in Georgia to bring costs down. What we need is the ability to offer good major medical plans that don't have to comply with state mandates.

Speaking of mandates, the various bills put forth in committee in Congress ADD coverage, they don't take it away. It's kind of like saying you will get all you can eat at a buffet but only pay dollar menu prices.

Life doesn't work that way. Except in Washington where you can wag your finger and claim others are lying about what you really did.